The Ellsberg Factor – Output versus Outcome

In Michael Ellsberg’s book The Education of Millionaires he outlines an important distinction between two metrics of productivity: output and outcome. Now, as it turns out, “output” is not a strong indicator of engineering ability, nor is it a strong indicator of project progress. In fact, focus on output instead of outcome is a strong indicator of wasted human capital within your company.

There was once an article written about the amount the number of lines of code in Microsoft’s new Windows 7 operating system. Naturally, it was some preposterous number. The article also generated some useless statistics, one of which was “lines of code per programmer per day.” If you’ve ever managed a software development group you know that this is an entirely useless metric. A good programmer might take a day to write 10 lines of code that do the same thing that a less-skilled programmer takes a day to do in 100 lines. What possible information is contained in the number of “lines of code per programmer per day?” To be fair, however, this is the limitation of having a non-technical person write a technical article. This is more the fault of the editor of the magazine than of the author of the article.

Now, at my current company (the one I’m leaving) there was an incident where two of the electrical engineering managers found this article and circulated a note asking all of the PLC programmers to let them know how many lines of code they’ve written in the last few months.

Can you see where this is going now?

Without understanding the reason, the PLC programmers (some of whom I know, for a fact, are excellent) submitted their number of lines… and an emergency meeting was called.

Apparently, compared to Microsoft programmers writing an operating system in a high level language these PLC programmers were not being very productive at all. Once the PLC programmers realized what the meeting was about there was an uproar. There was a lot of animosity for a while, a lot of lost respect, and a complete breakdown of trust.

In any respectable company, this type of thinking would’ve been grounds for immediate dismissal of the managers. It was the type of behavior that could only manifest itself if there was a supreme lack of understanding of what was going on in the engineering pool. The PLC programmers were working on industrial machinery and their productivity was being compared by a nonsense metric to a incomparable reference.

This is the problem of trying to measure output instead of outcome. Output alone doesn’t tell you anything about an engineering project. It’s like evaluating a construction project by measuring the sawdust on the ground. If you’re an OEM of capital equipment, your productivity metrics have to be time-to-market , time-to-production, and return on investment.